GameStop (NYSE: GME) was once a leading meme stock, known for its defiant rally in the face of hedge fund selling. The stock is, for the most part, detached from realistic financial fundamentals and seems to thrive almost solely off retail hype. Falling into a downtrend from November last year, GameStop stock dropped by a further 9% in premarket trading this morning after a slightly worrying Q4 earnings release.
Despite net sales at $2.25B beating expectations of $2.16B, the company reported an adjusted net loss of $141M, equal to $1.86 a share, higher than the $0.85 expected by Wall Street. The release tipped the stock into selling territory, with investors concerned about the company’s dubious sense of direction.
Investors have been anticipating a broader turnaround within the video game retailer for some time now, and all the while the company tout a transformation into a “customer-obsessed technology company”, nothing seems to be happening on the surface.
GameStop’s future plan, as far as investors are aware, is nothing more than an amalgam of half-baked possibilities. Blockchain, the metaverse, and NFTs were a few of the words thrown around in the earnings call, each of which lacked necessary forethought and any legitimate strategic backing. The NFT marketplace arguably has some potential, but Wedbush analyst argues the opposite; claiming the marketplace will see “limited success”, following a price target cut from $45 to $30.
For a company that was supported by mere retail hype for so long, it’s critical that the company gets its transformation right. Not only does the company need to adapt, but it also needs to attract legitimate investment in order to revoke its ‘meme’ tag.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.